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As students look to next year, the Herald begins a week-long investigation into why so many are leaving school without the skills they need.

A tragic mismatch of skills is shutting most of New Zealand's record near-300,000 jobless out of most of the 15,000 jobs that are available.

Unemployment has stayed stubbornly high for more than three years now and the total "jobless", including those discouraged from looking actively enough to be counted as "unemployed", have hit a post-war record of 294,900.

Yet 30 per cent of employers in a September survey by the Institute of Economic Research said they were finding it difficult to recruit skilled workers, up from only 7 per cent three years ago.

The usual inverse relationship, where rising unemployment makes it easier for employers to find skilled labour, has broken down because the skills of the unemployed no longer match the skills that employers need.

"It's not easy for a person who has lost a job in manufacturing to reskill and go into a different industry," says institute economist Shamubeel Eaqub.

More seriously for the long term, many young people looking for their first jobs are also emerging from their education with the wrong skills for the jobs available.

Half (52 per cent) of our 130,000 students studying bachelor's degrees last year were enrolled in "society and culture" subjects such as languages, law and social sciences, compared with only 12 per cent in information technology and 4 per cent in engineering.

That small minority are relatively well placed to get jobs. The jobs website Seek said last week that the jobs most in demand out of the 15,000 on its website were in information technology (IT) and engineering, followed by local government, law and healthcare.

People in those jobs also earn the highest incomes. A 2009 Statistics NZ study that followed graduates for three years after they qualified found that those with bachelor's degrees in engineering earned median incomes of $47,800 a year, well above those in society and culture ($40,100) or creative arts ($34,500).

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But few of the unemployed previously worked in any of the occupations in most demand. Most either had no job in the previous six years or were seeking their first job (24 per cent), or lost jobs in labouring (22 per cent), community and personal services (9 per cent) or sales (8 per cent).

Hays NZ head Jason Walker says the job market is volatile and there are no sure bets. "If you said to Ireland a few years ago that their lawyers and accountants would all be losing their jobs, they would have laughed at you," he says.

"So if I was a parent today and I'm talking to my kid who wants to do an arts degree, I'd say do that and at the same time do something else that is going to generate an opportunity to create an income."

How it happened

As in all developed countries, New Zealand's economy has changed enormously.

Technological changes and globalisation have slashed jobs in primary industries and in manufacturing, and 82 per cent of our jobs are now in services such as retailing and trade, healthcare, education, computing and other business services.

Our skill levels have had to change accordingly. Dr Stuart Middleton of Manukau Institute of Technology notes that in a single generation, from 1970 to 2005, the number of high school entrants staying on to year 13 jumped from 20 per cent to 62 per cent.

A quarter of people in their late 20s now have degrees, compared with 6 per cent of those now past retirement age.

But our first problem is that many of those who have stayed at school longer have still failed to learn even the basics. In a 2006 survey, 14 per cent of our adults could not read a simple document such as a map or a timetable and 20 per cent could not carry out a one-step calculation.

Up to about 1970, people with such low skills could still walk out of school into manual work. Dr Middleton notes: "Employment was easily available as the country enjoyed virtual full employment."

Today most of the unskilled assembly lines are overseas and even the least skilled service jobs that have replaced them are much more likely to require at least basic literacy and numeracy.

John Blakey of Competenz, which runs on-job training for the engineering and food industries, says apprentices have to document everything they do and their manuals are "full of diagrams and maths".

When Work and Income recently gave his agency a list of hundreds of unemployed people in Christchurch, only two had the basic skills required to become apprentices.

"Even now, if say 30 employers rang up and said we would like apprentices to start in January, we would struggle to find 30 young people in the Auckland region with the aptitude and the necessary foundation skills," he says.

Our second, related, problem is that many of those with skills have learned the wrong skills.

An Education Review Office evaluation reported in August that only four in a sample of 44 high schools provided "high-quality" school-wide careers advice. Many schools did not offer careers interviews until year 13, too late for the most needy students who had already gone.

Instead, most schools focus on academic skills even though only a minority of students go to university.

"You have competent teachers who are doing the wrong thing," Dr Middleton says.

"Sometimes it's the wrong subjects. Sometimes it's not giving students what I call the middle-class advantage, in other words all those motivations they get from talking at home about jobs and careers and what does A do and what does B do.

"You can't blame the parents for that. We are educational institutions, for goodness' sake, that's what we are there for. While we have a school system that is not responsible for educational failure, we will continue to get it."

Our third set of problems is more short-term. Infometrics economist Andrew Whiteford says the mismatch is partly geographical - skilled vacancies in Canterbury jumped by 36.5 per cent in the year to October, but most Kiwis live in the North Island where vacancies have been flat.

On top of that, we have been haemorrhaging skills to Australia and we have failed to replace them with enough immigrants. "I would tend to suspect [the mismatch] is temporary, and as the economy recovers and net immigration reverses it will sort itself out," Mr Whiteford says.

Response so far

This series will examine a wide range of initiatives to overcome the longer-term mismatch.

The Government has begun to help students plan careers by grouping our confusing array of about 6000 qualifications into a much smaller number grouped in five overlapping "vocational pathways".

The Education Ministry is reviewing careers advice and has suggested making schools give advice proactively to students who need it most.

Funding for industry training and tertiary education has been moved away from "bums on seats" to payment based on completed qualifications, and the Government is now working on ways to tie funding to Inland Revenue data on how many graduates actually get jobs.

A "youth guarantee" scheme will provide 8750 free places for 16- and 17-year-olds in training institutes next year and a further 2760 high school students are in trades academies and service academies.

The Government has also funded 2660 extra trades trainees this year in polytechnics around the country for rebuilding Christchurch, and is recruiting 900 people who will get six to 14 weeks of training to rebuild the city's roads and pipes.

The future

Education can never be solely about jobs. It also needs to prepare young people to be citizens and parents, and to help them develop their full potential to contribute to the world in whichever ways they choose. But most young people do want jobs, and clearly we could be doing better to help them. That seems bound to involve tying educational funding increasingly to helping students plan for jobs and actually getting them into jobs or further training after their courses.

The changes will also need closer interaction between education and the world of work, two spheres that need to learn how to talk to each other. "Business speaks the language of business and schools speak the language of education, and it's like speaking French and German," says Business NZ head Phil O'Reilly.

The Government is setting up 18 networks this year linking schools, training providers and employers to try to overcome the "language" barrier.

Success the driver

James Aylett, 14, and Paige Tapara, 15, both want to be successful - but money is not important to them.

The two year 10 students at Papakura's mid-decile Rosehill College are making crucial subject choices for their first year of NCEA studies that will begin to define their future careers.

Asked what sort of person he wants to be, James says: "Definitely successful, and I want to have some sort of leadership and not be the guy standing at the back.

" For me, it's pretty much a decision between the armed forces and the police."

Paige says : "I'm actually aiming to be a drama teacher or in the performing arts. I'm stuck between that and radio, like a presenter, that would be pretty fun."

Year 11 students at Rosehill have to take English, maths and science and can choose three other subjects.

James's three choices are physical education, "for fitness", Spanish "because if you are looking for work it will make you stand out", and drama, "because it's fun".

Paige has picked drama, media studies and advanced music.

Asked if they have a "Plan B" if their first career choice doesn't work out, James says: "Not really. Maybe go into communications and do some sort of journalism or something."

Paige says: "Probably if I was not doing performing arts I'd do a communications degree."

Both have done units on careers in social studies, but did not visit any workplaces. They have not seen a careers adviser and have not heard that subjects are being grouped into "vocational pathways".

Rosehill principal Graeme Macann is a sceptic about the pathways.

"I can see the logic of trying to group subjects by occupation but it still seems a pretty artificial construct to me. We are certainly not restructuring our courses to do that," he says.

Since last year form teachers, who stay with the same class throughout their high school years, have also had regular "structured conversations" with students about their goals, including subject choices to help to achieve them.